UK Money News
21st December 2007
Bank of England 'has tough calls to make'
With inflation expected to increase gradually over the next year, the Bank of England will have some difficult decisions to call on interest rates.
Such is the opinion of the principal economist at the Confederation of British Industry (CBI).
Lai Wha Co states that above-target inflation is set to run the course of 2008 - and falling interest rates would likely make inflation more marked.
While lowering interest rates may be welcomed by those with mortgages and other help with loans to pay off, bringing them down significantly to kick-start inflationary pressures.
She said: "On the one hand [the Bank is] monitoring how sharply the economy might slow, but on the other hand it has to weigh up the concerns about inflationary risk."
She added that the driving forces behind inflation are international, meaning that the Bank must balance its domestic decisions carefully.
Earlier this week, the CBI released its predictions for the year ahead, stating that the Bank of England was expected to make a further interest rate cut in the early part of 2008 to keep medium-term inflation in check.
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